Wednesday, February 4, 2009

Assembly Introduces Package of Tenant Protections

And this time, with a Democratic Senate, some will pass. Tenant protections were gutted in the 1990s and again in 2003. It's about time the pendulum swung back in the other direction. But no article would be complete without a few red herrings and demagoguery from the (intentionally misleadingly named) Rent Stabilization Association:

“You will see increased foreclosures on multiple dwellings,” said Joseph Strasburg, president of the Rent Stabilization Association, a powerful landlord group. “You have total chaos in this city when you have large complexes being foreclosed on.”

News flash: There is going to be a wave of foreclosures regardless. Over the past 8 years credit standards were abandoned, prices were inflated far beyond fundamentals, and speculators bought properties based on pie-in-the-sky pro forma financials. Before I went to law school I was a financial analyst and a lender for a large regional bank (until 2002). The decline in credit standards from 2002 - 2007 was nothing short of breathtaking. It was also the logical outgrowth of Bush administration policy: open the credit spigot, abandon regulatory practices and let the good times roll.

This is the reason for the current economic crisis. It was always unsustainable, and while the adjustment back to valuations based on fundamentals (price/rent ratios, debt service/income ratios) will be painful for many, it is also unavoidable.

Of course the big landlords are going to fight it tooth and nail. But don't rely on them to argue honestly.